Microsoft, Barnes & Noble End Nook Partnership Deal - The UpStream

Microsoft, Barnes & Noble End Nook Partnership Deal

When Microsoft and Barnes & Noble announced in 2012 that they would be working together, the response was varied. Some saw the $300 million investment Microsoft made in Nook as a natural partnership - Barnes & Noble was working on being a contender in the low cost tablet market and Microsoft was about to take their fight to tablet hardware. Low cost Nook hardware powered by Microsoft's Windows 8 rather than Google's Android might have helped both companies. Others saw it as an impossible partnership with little to be gained by either company.

2 years later and the landscape looks quite different. Barnes & Noble has had very little luck getting people to purchase its Nook hardware, compared to Amazon's Kindle Fire. They will even spin Nook off to its own company, since the focus of the device seems to have been completely lost. The hardware is now made by Samsung, the system is made by Google and very little of it is focused on books.

On the other hand, Microsoft has made huge gains in both the low cost and top-tier tablet world. The Surface Pro 3 is a major contender in the high-end tablet, as well as Ultrabook, categories, and devices such as the HP Stream 7 have started to take hold in the low cost category.

With the breakup of this partnership, Microsoft leaves with $120 million in cash and stock. That is 40% of what they originally put into the partnership, and not all in cash. Certainly not the winning decision they had hoped, but also not the major loss it could have been, assuming the Nook continues to be the losing product it is today. At least Microsoft got a Nook app for Windows 8 out of the deal.